Question

Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). The table that follows shows the direct expenses incurred and square footage occupied by all four departments, as well as total sales for the two operating departments for the year 2019. Department Direct Expenses Square Feet Sales Advertising $ 14,000 1,350 Administrative 30,000 750 Shoes 116,000 7,200 $ 100,800 Clothing 17,000 5,700 109,200 The advertising department developed and distributed 140 advertisements during the year. Of these, 28 promoted shoes and 112 promoted clothing. Utilities expense of $42,000 is an indirect expense to all departments. Complete a departmental expense allocation spreadsheet for Marathon Running Shop. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) the $42,000 of utilities expense to the four departments on the basis of floor space occupied, (3) the advertising department’s expenses to the two operating departments on the basis of the number of ads placed that promoted a department’s products, and (4) the administrative department’s expenses to the two operating departments based on the amount of sales.

Answer 1

Expenses	Service Departments	Operating Departments	Total
	Advertising	Administrative	Shoes	Clothing
Direct Expenses	14,000	30,000	116,000	17,000	177,000
Utilities Expense (1350:750:7200:5700)	3,780	2,100	20,160	15,960	42,000
Advertisement Expenses	-	-	3,556	14,224	17,780
Administrative Expenses	-	-	15,408	16,692	32,100
Total	17,780	32,100	155,124	63,876	268,880